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Over the past two years, some of Asia's less developed countries such as Thailand, the Philippines, and Indonesia have been its top-performing stock markets; gains have reached as high as 60%. The smallest returns have come from the region's most developed market: Singapore, the world's richest country as measured by gross domestic product per capita.

What's happened? The city-state is adjusting from a high-growth, high-immigration model to a lower-growth template that's more responsive to social pressures, says Melvyn Boey, a strategist at Bank of America Merrill Lynch in Singapore. Generally, that will mean lower corporate profits. And full employment and less immigration will drive up wages. "Domestic-centric players that rely on labor are seeing a double whammy of slower top-line growth and rising costs," says Jit-soon Lim of Nomura. "The market has been weighed down by policy-induced headwinds which have pressured margins and depressed earnings."

Many Singaporean stocks are probably best avoided right now. Earnings growth for the broader market is likely to slow to just 5% this year before rising to about 15% next year. And the market isn't cheap. It trades at 15.5 times this year's earnings and just over 14 times next year's.

Moreover, money from quantitative easing by central banks in the U.S., Europe, and Japan has spilled into asset classes like Singaporean real estate in recent years, says Boey. To prick the property bubble, the government has announced seven rounds of "cooling measures," which have depressed property stocks but hardly moved the needle on inflated real-estate prices, he notes.

Singapore offers different attractions. "While it may not have the same pace of growth as some of emerging neighbors, Singapore has a stable government, consistent policies with a reliable regulatory framework, and is a well-developed international financial center, all of which help lower the risk profile for investors," says Robert Bruce, head of research for CLSA in Singapore.

Investors who want to participate should avoid real-estate firms, banks, and pure domestic plays. An alternative for foreign money, says Conrad Werner of Macquarie Securities, is
Genting SingaporeG13.sg -1.0256410256410255%Genting Singapore PLCSingapore: SGXSGD0.965
-0.01-1.0256410256410255%
/Date(1425423883000-0600)/
Volume (Delayed 20m)
:
19106400
P/E Ratio
22.75943396226415Market Cap
11787481188.2415
Dividend Yield
1.0362694300518134% Rev. per Employee
220191More quote details and news »G13.sginYour ValueYour ChangeShort position
(GENS.Singapore), which runs one of just two local casinos. "They are part of a protected duopoly, a high-margin, high-return business with US$1 billion in annual free cash flow, which requires very little new investment and is sitting on US$3.5 billion in cash," he notes. Excluding cash, the stock sells for 16 times earnings and yet profits should grow 27% a year through 2015, says Werner. He thinks shares can rise over 20% to S$1.85 (US$1.49).